Before declaring war on Republic Industries last week, American Honda Motor Co.'s top executives met quietly several times with Republic managers.
In California, Florida and Georgia, Honda executives asked Republic Co-chairman Steve Berrard and others to slow their plans to acquire large numbers of Honda dealerships.
'They don't even negotiate in good faith,' Dick Colliver, senior vice president and general manager of Honda Division, complained last Tuesday, May 6, a day before American Honda filed its federal lawsuit against Republic. 'While we were negotiating with them, they went out and bought a Honda store.'
Legal experts say Honda will have a tough time stopping Republic.
Republic has just acquired an Acura store in Orlando, Fla., as part of its purchase of Courtesy Auto Group and has just announced the purchase of its first Honda store - Miami Honda - as part of the acquisition of de la Cruz Auto Group in Miami.
In its action, filed last week in U.S. District Court in Los Angeles, Honda accused Republic of attempting, in effect, a 'hostile takeover of American Honda's dealership network.' The complaint was filed after Republic announced it had reached an agreement to purchase Miami Honda.
Honda seeks unspecified monetary damages and a permanent injunction preventing Republic from soliciting Honda dealers. It also asks that Republic operate any Honda dealerships it acquires in accordance with Honda's dealer policies.
Honda joins Toyota Motor Sales U.S.A. Inc. in opposing the fast growth of Chairman H. Wayne Huizenga's Republic Industries, which since December has grown from nowhere to become by far the nation's largest new-vehicle dealership chain.
Toyota is trying to block Republic's purchase of a Houston dealership.
Republic has been welcomed by the other four automakers whose dealerships are its core targets -Nissan, Chrysler Corp., Ford Motor Co. and General Motors, except for its Saturn Corp. unit.
Jac Nasser, president of Ford Automotive Operations, said late last week that he views the move toward public ownership as potentially beneficial for the industry.
'Huizenga's ... primary strategy and vision is built on enhanced customer satisfaction and service. We're all for that,' Nasser said in an interview. 'We also believe that he can help the overall Ford distribution strength. My personal view is that there is a lot of goodness in having a mix of different types of ownership in the distribution area: small, family-owned companies, medium companies and larger companies that have public ownership. That's healthy.'
Honda's suit alleges that Republic has engaged in unfair competition by refusing to comply with the Honda and Acura Dealer Sales and Service Agreement and American Honda's policy limiting the number of dealerships a public entity can own.
Honda contends Republic has neither the auto retailing experience nor the long-term commitment to the auto business that Honda wants in its dealers. Republic blasted Honda's suit as 'entirely without merit.'
Honda has retained Daniel Petrocelli, the lead lawyer on a team that won a multimillion-dollar settlement for the Fred Goldman family in the O.J. Simpson wrongful death civil case last year.
'It made sense to get a resolution of this issue very soon ... right away,' Petrocelli said.
Since December, Republic has bought 21 dealer groups with 103 franchises and sales of more than $5 billion.
'Republic's action is not in the best interest of the consumer, Honda or its dealers,' Honda Division's Colliver told Automotive News.
Honda's complaint notes that Republic has been in the automobile business only a short time.
Huizenga's 'track record is to build 'em up and sell 'em,' said Colliver. 'What happens if they do the same thing they did with Blockbuster? They could sell to a competitor of ours and we would have no control over it.'
Honda cites several objections to Republic's activities:
Republic has stated it wants to acquire about 50 Honda and 13 Acura dealerships, up to 20 percent of national sales volume, according to Honda's suit.
Republic's plans, including the one to develop the AutoNation USA name as a national retail brand, would dilute or conflict with the Honda and Acura brands.
Honda worries Republic ultimately would sell its dealerships to a competitor or some other entity over which Honda would have no control.
Republic denies it wants to buy 20 percent of Honda's U.S. volume.
Jim Donahue, Republic vice president of corporate communications, said: 'Earlier this week Republic proposed to Honda in writing a phased-in approach to the acquisition of Honda dealerships that would result ultimately in Republic having no more than a low single-digit percentage' of Honda's volume.
He pointed out that Hendrick Automotive Group already owns a far larger share. Colliver said Hendrick has 16 Honda and three Acura stores.
Donahue said Republic will continue trying to talk with Honda. He said Republic had already completed the purchase of Courtesy Auto Group in Orlando, Fla., without any objection from Honda. That purchase included an Acura point.
Donahue said the AutoNation brand 'applied only to the used-car business,' and would not affect Honda.
Republic management also promises not to use Republic's size to get special concessions from manufacturers, Donahue said.
Honda's suit 'is nothing more than a rather blatant attempt to usurp the rights of state motor vehicle boards around the country,' he said.
A TOUGH CASE?
Honda's suit contends Republic is engaged in unfair competition by trying to acquire dealerships without complying with Honda's dealer agreement and policy, and by disrupting Honda's contractual relationships with its dealers.
The legal question is whether manufacturers can prevent dealers from selling their stores to qualified buyers. Some observers say Honda will have a tough time proving Republic is doing anything illegal.
'I think Honda's got a horribly difficult row to hoe to make that stick,' said Dan Myers, a Tallahassee, Fla., lawyer specializing in automotive franchise law. Honda's suit 'damn sure reads more like The Star or the National Enquirer than a complaint. ... It just doesn't have a lot of case law in there.'
If Honda fails in federal court, Myers said, the battle will move to the states, where state motor vehicle boards have the authority to determine if a buy-sell transaction complies with state laws.
Said Colliver: 'If we wait for the states, we could have 50 cases on our hands.'
Some dealers voiced support for Honda's action. A small-town Honda dealer, who asked not to be named, said: 'I'll be surprised if Honda is successful in holding them off, although I hope they are. I like the idea of hands-on operators. Me going head-to-head with Huizenga is a little bit scary.'
Donald Levin, marketing manager of the Dave Mungenast multiline franchise in St. Louis, which includes Honda, Acura, Toyota and Lexus, said, 'Honda and Toyota have a broad spectrum of products that they want to have in stores at all times. What if Republic decides they don't want to carry all those products, decides that they don't make enough return on a Prelude? And even if you're just in this business just to sell cars, you still have to have a relationship with the customer, because cars are a very personal thing. They're not generic like cereal or shoes.'
Since entering the auto business late in 1996, Republic has left most top dealers in place to manage their dealerships, a number of which are in the Automotive News list of Top 100 dealership groups.
Mike Maroone, president of Maroone Automotive in Pembroke Pines, Fla., stayed on and took a job as president of the AutoNation USA new-vehicle group. Maroone Automotive is 33rd on the 1996 Automotive News dealer list with sales of $660.5 million. Lawrence Rich, a veteran of the JM Family Enterprises automotive financial and distribution empire, is president of AutoNation USA, Republic's chain of used-car superstores.
'If there's a chain of more experienced retailers in the country, I'd like to know who they are,' Republic's Donahue said.